From Manufacturing Chips to the Dismissal of Subprime Mortgage Based Lawsuits

Wednesday, July 30, 2014 -
Article by:
Lender411 Member

Earlier this month, the city of Miami suffered a blow by the U.S. District Court for the Southern District of Florida. The Court dismissed three suits filed the city against mortgage lenders Bank of America, Wells Fargo, and Citigroup.[1] The City alleged loss of tax revenue and increased costs of providing services stemming from predatory lending to minority communities. Until recently, courts permitted anyone to file a lawsuit under the Fair Housing Act. FHA and other statutes as long as they could establish an injury in fact that was fairly traceable (Gladstone Realtors v. Village of Bellwood).[2] But the recent Supreme Courts decision regarding false advertising by printer manufacturer Lexmark, has changed the legal landscape making it more difficult to establish that an injury flows from a violation of a statute.

In Lexmark Intern., Inc. v. Static Control Components, Inc., parts manufacturer Static Control alleged false advertising by laser printer manufacturer Lexmark. Static Control asked the Supreme Court whether it could sue the printer manufacturer under the Lanham Act, trademarks, service marks, and unfair competition. The Court ruled in favor of the parts manufacturer, and held that a plaintiff must fall within the statutes zone of interest and show proximate cause in order to have standing to sue under a Federal statute. In other words, a plaintiffs injury must flow directly from a violation of the statute, and the plaintiff must be the party Congress wanted to protect in enacting the statute.[2]

The City of Miami claimed the numerous foreclosures resulting from predatory lending by Bank of America, Wells Fargo, and Citigroup caused loss of revenue and an increase in costs for services. The city alleged the banks targeted minorities and offered mortgages that were likely to end up in foreclosure. Like other cities and counties across the country, the city of Miami expected a favorable ruling arguing the lenders violated the FHA statute. But referencing the Lexmark-Static Control Components decision, the District Court held purely economic injury is outside of the zone of interest of the Fair Housing Act. The purpose of the FHA is to prevent discrimination in the provision of housing, and the citys economic injury falls outside racial interest. Furthermore, the court declared the citys statistical evidence insufficient to support proximate cause claims.

Ill try to rephrase this in simpler terms. Today, the legal framework of our system requires a clear and concise relationship between cause and effect. The main purpose of the Fair Housing Act is the protection against discrimination as it relates to housing. To claim that a citys revenue falls inside the zone of interest of the Act, or that a citys loss of revenue result as a proximate cause of subprime lending is far reaching. I am glad for the dismissal of this case.

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